I had a stray thought the other day, related to Chris Anderson’s observation that what’s really radical about the idea of “free” isn’t its economic reality but economic psychology. Free things freak us out; either we think they’re worthless or scammy or we love them so much that sometimes they actually make us economically stupid. (I once stood in line for an hour for a free burrito when I was paying a babysitter $10/hour at the same time. Say what you will about whatever I was “buying” with my money, I wasn’t maximizing my utility.)

If what matters about “free” is the psychology, then the solution is to make paying something feel like paying nothing.

Think about it! When the idea of free really works, it makes us forget that it ever even cost anything at all. Reading web pages is free – once you count the money you pay for internet access. Between my phone and my house, I pay more for internet access per month than I do books – and I read a lot. Add on to that all of the ways my free behavior is paid for with information from or attention paid by me, and a ruthless calculus would determine that the internet is expensive as hell.

Almost all free things are cross-subsidized in some ways. But if the cross-subsidy is obvious – “Free phone with a two-year plan worth at least…” – then free fails. If your website suddenly has a glaring and obnoxious banner ad, then it doesn’t matter if it is as free today as it was yesterday. It doesn’t feel free anymore.

On the other hand, you can actually make getting something you’ve paid for feel like something free. Casinos are terrific at this. Everything’s free, and you still spend money everywhere. Sometimes, governments are good at this too – although they sometimes create benefits that are so invisible that we don’t even think about them at all, except when they fail. (Free can’t work too well! Or people will still feel cheated!)

A classic example might be buying something – let’s say, groceries – with a credit card. I used to pay for all of my groceries with cash or check, so I always had to be aware of exactly how much I was spending and whether I either physically had enough money on me or at least had enough in the account (and enough to still pay rent, etc.). Then I got a credit card that gave me rewards at gas stations and grocery stores – the money is like invisible bullets. I don’t worry about each individual trip, I just pay the lot at the end of the month. This ramped up until I looked at a breakdown of my finances, and realized I was paying twice as much for food each month as I was a few years before. It felt more like free.

Digital media is catching on. I hardly ever used to buy anything in iTunes, because it was a total hassle. The terms of service had always changed, I had to log-in, add something to my cart, and then check-out. It was worse than going to a record-store! And a lot worse than Amazon, where I had one-click, free shipping… Anyways, I recently disabled all of the nag screens, and suddenly, I’m buying stuff on iTunes left and right. People talk about this with their Kindles, too – the fact that you can browse for, buy, and begin reading books so smoothly reduces the friction of every purchase, so you read one after another. It all goes through Amazon and you get billed at the end of the month. You know you bought something… but you kind of didn’t. To quote Flanders, “it feels like you’re wearing nothing at all.”

Software sort of works like this too. It’s easy to buy applications for the iPhone or iPod touch, because you do it all right through Apple – it syncs to your iPod and you’re ready to go. It’s much harder, psychologically, to go to a developer’s website, fill out all of your information, decide whether or not to use PayPal or your credit card, download the application, open it up, enter your serial (which went to your old email address), register the software again, etc… At every moment, it screams, “you’re paying something! You’re paying something! Are you sure there isn’t free software that could do the same thing?”

The real trouble, however, is advertising. If you have an ad-supported application or website, it’s going to feel the most free and probably be the most popular if the ads are so discreet as to be practically invisible – you don’t even realize that someone paid for you to see what you’re seeing. But advertising HAS to be attention-grabbing if it’s going to work.

Newspapers actually came up with a genius solution to this problem years ago – the classified ad. It’s an advertisement that feels like a service. In most cases, when you were reading classifieds, you actually PAID to see them (although each ad – for the reader – was free). Now, of course, classifieds are (almost) actually free (to place and read). But you still see things like job advertisements, etc., which play out to readers more like services than ads. And because they feel like services, they feel like free.

So here’s the (provisional) lesson. There is no such thing as a free lunch. But some lunches feel freer than others.

Chris Anderson says the boundary between $0.01 and free is so magical b/c of the change in purchase friction. It’s like the phase change between water and steam… on one side of the boundary you’ve got cold water, lukewarm water, hot water… and then snap, you go up one more degree, and it’s something else entirely.

Discontinuous.

So if you can rig up pay systems that are just as friction-free — that disassociate payment from the moment of acquisition, that are one-click whether you’re getting something for free or buying it for $1.99 — you get a lot of the same benefit.

As you point out, Tim, the App Store and the Kindle are both doing this. And that’s why, for as onerous as they can both be, in different ways, I’m really happy they’re doing what they’re doing. They’re carving out spaces where content can be sold /not for free/ but with so little friction it almost feels that way — and that’s really important.